2018 Fall issue of Horizons

It’s a fact, in recent years, mergers and acquisitions (M&A) have become increasingly common. As businesses extend and take on new opportunities through M&A, they naturally become exposed to risk and the possibility of failure.

With more than 20,000 deals in each of the past four years, the M&A marketplace has seen an uptick of activity since the 2008 recession. Businesses are acquiring other businesses to enter new markets, gain buying and pricing power, tap into synergies and for a host of other reasons. All of these reasons have one main goal – growth.

In today’s age, however, as businesses grow and compete, some are left exposed to post-acquisition failure. Post-acquisition failure can be defined as any of the following:

∙ Acquirer needing to take a write-down

∙ Acquirer divesting shortly after acquisition

∙ Bankruptcy

∙ Cultural integration issues

∙ Exodus of talent from the acquired company

RubinBrown has highlighted seven areas that are most susceptible to post-acquisition failure and how these risks can be mitigated.

Revenue Recognition New revenue recognition rules, effective January 2019, overhaul authoritative guidance into one comprehensive framework for all private entities. For many businesses, revenue recognition is and will continue to be a complex issue in which several factors need to be considered. Revenue recognition is an integral part of any business, but one going through an acquisition that is seemingly providing growth can be especially complicated . It is essential to uncover revenue recognition practices of the acquired company in the due diligence stage to understand the differences between the two firms. Inconsistent practices that go unnoticed have the potential to lead to post-acquisition failure.

Fall 2018

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